According to a cost of living survey released on Tuesday by Swiss bank UBS AG, Dubai was the 40th most expensive place to live in the world last year. Based on a basket of 122 items, it places behind urban rivals like Moscow and Singapore, but far ahead of Mumbai and Kuala Lumpur, which were rated the cheapest.
The region’s inflation rates are driven both by the falling greenback and by stratospheric rents. Until recently, only citizens of the six Gulf Co-Operation Council states could buy property in the Gulf, and rising construction and shipping costs as well as an influx of expatriate workers from 192 countries who are drawn by the eternally sunny five-star lifestyle have contributed to the rent prices.
In January, the UAE set an inflation target of five per cent for 2008, but investment banker Merrill Lynch warned the same month that the UAE’s inflation could touch a 20-year high of 12 per cent this year, unless the dirham is revalued or depegged from the dollar.
Kuwait did so last May, pegging its dinar to a basket of currencies instead, which led the dinar to appreciate 5.9 per cent through the end of 2007.
The UAE and Qatar have repeatedly said they will not change the dollar peg, meaning inflation - and reduced remittances - are likely to stay.
Workers from the Philippines face the same situation, says Glyndon Lim, who works at an advertising agency in Bahrain. “What I can send home is so much lower now,” he says.
To fill the labour gap, then, many companies are turning to China, but with language a barrier, several construction companies have already repatriated their workers.
What can the government do?
A former Indian minister feels the Indian government needs to step in to compensate the loss incurred by NRIs sending money home.
“The government should work out some incentives for Indians in the Gulf for their remittances which are not repatriat”d,” said Indian MP and former cabinet minister Suresh Prabhu, speaking at a conference in Bahrain. “It is sad that Finance Minister P Chidambaram, in his budget last month, has not even mentioned the contributions of NRIs, whose remittances have given a tremendous boost to the domestic economy,” he said, adding that he would take up the issue with Parliament’s standing committee on external affairs.
But the government seems to have U-turned on a plan to impose a minimum wage for citizens moving to the Gulf. G Gurucharan, joint secretary (financial services) at the Ministry of Overseas Indian Affairs (MOIA) was quoted by Bahrain’s Gulf Daily News as saying the country would not impose a minimum wage, contradicting statements made by Indian embassies in both Bahrain and the UAE.
India had been widely reported as planning to ban unskilled workers from working abroad unless they were paid a minimum of $265 a month.
But one NRI whom DNA spoke to had an ingenious solution: make it easier for Indians to send remittances hom”. “Very often we need to use private banks to get money home. But the State Bank of India has the best rates and network, only it isn’t very consumer - or internet - friend”y,” says saleswoman Sapna Set”. “And teach labourers to use banks. Many of them keep their money in cash with them, and if a camp catches fire, their money burns up, to.”
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